Taiwan shares retreat, led by expensive high-tech stocks

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Taipei, Shares in Taiwan pulled back to close below the 10,900-point mark Tuesday as investors rushed to lock in profits built up from the bellwether electronics sector, taking cues from iPhone assembler Hon Hai Precision Industry Co.'s disappointing results for the first quarter, dealers said.

Selling also spread to other high-tech heavyweights such as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), as well as large-cap stocks, in particular in the petrochemical and financial sectors, which added downward pressure to the broader market, the dealers said.

Market sentiment remained cautious about trade friction between the United States and China, although U.S. President Donald Trump reversed his harsh stance on Chinese tech firm ZTE Corp., which seemed provide the chance for a breakthrough in tension between the two economies, the dealers added.

The weighted index on the Taiwan Stock Exchange or the Taiex ended down 77.66 points, or 0.71 percent, at the day's low of 10,874.73, off an early high of 10,978.38, on turnover of NT$152.82 billion (US$5.13 billion).

The market opened up 0.12 percent and moved to the day's high in the early morning session on follow-through buying from the previous day, when the Taiex gained 0.86 percent, the dealers said.

But selling set in at around 9:30 a.m. as investors rushed to dump large high-tech stocks, in particular Hon Hai, which reported a more-than 66 percent sequential fall in its first-quarter net profit, which pushed down the broader market below 10,900 points. The weakness continued until the end of the session, they said.

"Technical resistance has been high after the Taiex vaulted past the 10,900-point mark yesterday, so investors used Hon Hai's poor earnings report as an excuse to pocket their gains built in the electronics sector Monday," Mega International Investment Services Corp. analyst Alex Huang said.

Hon Hai, second to TSMC in terms of market value, fell 3.37 percent to close at NT$86.00, with 72.55 million shares changing hands after a 4.71 percent increase the previous day.

The selling in Hon Hai was triggered by an earnings report released a day earlier that said the manufacturing giant's net profit fell 66.4 percent in the first quarter from the previous quarter to NT$24.08 billion because of the traditionally slow first quarter. Earnings per share fell to NT$1.39, down from NT$4.14 a quarter earlier.

"Selling spread to other heavyweights in the high tech sector as well as the non-high tech sector, so it was no surprise that the main board failed to sustain its strength above the 10,900-point level today," Huang said.

Among the falling tech stocks, TSMC lost 1.07 percent to end at NT$230.50 with 23.75 million shares changing hands, and Largan Precision Co., a smartphone camera lens supplier to Apple Inc., also dropped 2.73 percent to close at NT$4,090.00.

Led by these heavyweights, the bellwether electronics sector closed down 0.69 percent.

Profit taking was also seen in the old economy and financial sectors almost throughout the session as investors feared a major pullback ahead of 10,900 points, Huang said.

In the petrochemical sector, Formosa Petrochemical Corp. shed 2.39 percent to close at NT$122.50, and Formosa Chemicals & Fibre Corp. lost 1.75 percent to end at NT$112.50.

Among the falling financial stocks, Cathay Financial Holding Co. fell 1.82 percent to close at NT$54.00, and Fubon Financial Holding Co. dropped 1.16 percent to end at NT$51.20.

"Many investors at home and abroad are watching closely how the next round of negotiations between Washington and Beijing will proceed this week to resolve their trade problems," Huang said.

"Although Trump offered an olive branch to China regarding ZTE, it failed to ease fears over a trade war between the two economies," Huang said.

According to the TWSE, foreign institutional investors sold a net NT$913 million-worth of shares on the main board Tuesday.

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